Crude oil prices fell on Wednesday amid disappointing economic data from China and rising US inventories, wiping out some of yesterday’s strong gains after it became clear that the US President Donald Trump will delay the imposition on new tariffs on Chinese imports.
Futures on US crude oil WTI fell by 1.07% to 56.49 USD per barrel, while the Brent variety is down by 0.73% to 60.85 USD per barrel. Both varieties WTI and Brent yesterday reported increases of 4% and 4.7%, respectively.
China reported weak macro data in July, including a surprising drop in industrial output growth to over 17-year lows. This highlights the growing gaps in the economy due to the ongoing trade war with the US. China is the world largest oil consumer and any slowdown in its economy may result in a reduction in global demand.
The deterioration of industrial production in China and the weakening of consumer spending suggest that the overall picture is not good and energy demand may be under pressure.
Crude oil prices rose on Tuesday after US President Donald Trump postponed the imposition of 10% tariffs on Chinese imports, which were initially planned for early September. However, Chinese imports with an annual turnover of about 110 billion USD are subject to customs duties next month.
the price was negatively affected by the report of the American Petroleum Institute that US crude oil stocks rose unexpectedly last week by 3.7 million barrels to 443 million barrels. Analysts’ expectations were to shrink by 2.8 million barrels.
Oil demand should continue to soften amid weak economic data. The global slowdown amplified by tariff conflicts and uncertainty over Brexit also shrank European economies. A slump in exports sent Germany’s economy into reverse in the second quarter.
The Eurozone’s GDP also barely grew in the second quarter of 2019.
Profit-taking after Tuesday’s sharp gains also weighed on crude prices on Wednesday, analysts said.
US oil inventories
The American Petroleum Institute (API) has estimated a surprise crude oil inventory build of 3.7 million barrels for the week ending August 8, compared to analyst expectations of a 2.761-million barrel draw.
The inventory builds this week compares to last week’s draw of 3.4 million barrels, according to API data. A day later, the EIA contradicted the API report, estimating that there was an inventory build instead of 2.4 million barrels.
After today’s inventory move, the net draw for the year is 4.53 million barrels for the 33-week reporting period so far, using API data.
The API this week reported a 3.7-million-barrel increase in gasoline inventories for the week ending August 8. Analysts predicted a draw in gasoline inventories of 810,000 barrels for the week.
Distillate inventories fell by 1.3 million barrels for the week, while inventories at Cushing fell by 2.5-million barrels.
The US crude oil production as estimated by the Energy Information Administration showed that production for the week ending August 1 rebounded to 12.3 million barrels per day, just 100,000 barrels per day off the all-time high of 12.4 million barrels per day.
The US Energy Information Administration report on crude oil inventories is due to be released at its regularly scheduled time on Wednesday at 10:30 a.m. EST.